Vivendi SA (VIV.FR) Wednesday won a major court battle as a U.S. judge's decision to narrow the size of a class action against the company slashed its potential liabilities by 80%.

The Paris-based company said it will "significantly" reduce the EUR550 million provision it made in its 2009 accounts to cover any eventual payout after a jury in January last year found Vivendi liable for 57 misstatements about its financial condition in 2001 and 2002 and said it acted recklessly in connection with those statements.

The damages arising from the ruling in January 2010, which was based on a class involving shareholders outside the U.S., could have totaled more than $9 billion, according to lawyers for the shareholders, although Vivendi's lawyer Herve Pisani rejected the sum as "unfounded."

The ruling Tuesday by U.S. District Judge Richard Holwell that shareholders who bought Vivendi shares outside the U.S. are barred from bringing fraud claims against the company in the U.S., considerably narrowed the overall size of the potential class and therefore dramatically cut Vivendi's potential liabilities. The move, which will free up cash, comes as the group prepares to buy out Vodafone PLC's (VOD) minority stake in telecom operator SFR.

"We are very satisfied with today's decision", Vivendi's Chief Executive Jean-Bernard Levy said in a statement. "It is a substantial victory for Vivendi."

At 1302 GMT, shares in Vivendi rose 1.7% to EUR20.59 on the news, which is the latest in a string of positive developments for the company, which also recently settled a protracted legal battle in Poland.

"After recent case law in the U.S. pointed the way, the decision is not unexpected, but it's still reassuring, as it lowers massively the chances of an eventual settlement far above that already provided," said Kepler Capital Markets analyst Conor O' Shea.

Vivendi had long been trying to achieve the narrowing of the class, arguing in particular that the opt-out nature of U.S. class action suits, which automatically include plaintiffs in a class unless they choose otherwise, is incompatible with French laws, where plaintiffs must actively decide to join a lawsuit.

In France, where class actions are not recognized, shareholders have to file individual complaints or join an association which files on their behalf, experts say.

It isn't clear from Judge Holwell's decision what the next step in the litigation process will be.

He declined to enter a final judgment against Vivendi, saying the company is entitled to challenge on an individual basis the extent to which shareholders relied on the alleged misstatements. The judge said the individual reliance issues may require separate proceedings.

"In addition, it may be that the methods for calculating an individual claimant's damages will be hotly contested and may trigger additional appeals," the judge said.

Vivendi remains committed to appealing any eventual decision by the court, Pisani said. According to the lawyer, it could still take a year or two before the size of any indemnification will be known as the percentage of shareholders making a claim has to be established before the size of an indemnification can be set.

Vivendi said it will analyze the judge's decision in detail to determine its next steps, but declined to comment further.

-By Ruth Bender of Dow Jones Newswires and Max Colchester of Wall Street Journal; ruth.bender@dowjones.com, max.colchester@wsj.com

(Chad Bray and Inti Landauro contributed to this report.)